San Francisco's office vacancy rate rose to 20.1% in the second quarter, the highest level since 2003, despite an increase in leasing activity.
The amount of empty office space more than doubled from the 9.9% vacancy rate in the second quarter of 2020, the onset of the pandemic. Leasing activity totaled 974,067 square feet, the highest level in a year, according to real estate brokerage Cushman & Wakefield.
"Activity seems to be picking up. It's not like it was yet," said Robert Sammons, Cushman & Wakefield's senior director of Bay Area research. "The recovery really won't begin fully until 2022."
Asking rents fell 11.9% to $73.24 per square foot annually from $83.11 per square foot a year earlier.
There are positive signs: 80% of eligible residents have been vaccinated, and San Francisco's unemployment rate was down to 5.1% in May, better than the national rate of 5.8% at that time. The U.S. economy added 850,000 jobs last month, the highest level in 10 months, according to data released Friday.
Sammons said downtown is seeing more foot traffic and restaurants and bars are filling up.
"It's still quiet, but it's not as quiet as it was. You see a lot more people on the streets," he said.
Still, Cushman & Wakefield projects that the vacancy rate will continue to climb to a high of 23% at the end of the year before improving.
The biggest deals in the second quarter were Figma's 97,647-square-foot lease at 760 Market St., Aurora Labs' 59,240-square-foot lease at 85 Bluxome St. and Sigma Computing's 50,348-square-foot lease at 116 New Montgomery St.
Levi Strauss & Co. has also agreed to renew its lease at its longtime headquarters at Levi's Plaza, which is set to be the largest deal during the pandemic.
Genealogy company Ancestry.com, software firm Splunk and real estate company Trulia added to the city's sublease listings during the second quarter.
In Silicon Valley, the office market is recovering faster, Sammons said. In May, Apple leased 701,000 square feet in Sunnyvale, evidence that tech giants are still expanding despite a shift to more remote work.
Roland Li is a San Francisco Chronicle staff writer. Email: [email protected] Twitter: @rolandlisf
